Archive for 2011

• ADP Says The Economy Added 206,000 Jobs Last Month
  Eddy Elfenbein, November 30th, 2011 at 9:07 am

  What’s also helping the pre-market optimism today is the news that according to ADP ($ADP), the U.S. economy created 206,000 jobs last month. Economists had been expecting a gain of 130,000.

  The ADP report comes out just two days before we get the official numbers from the government. I’m usually not a big fan of the ADP numbers but I have to admit that they got it close last time. For October, ADP said that there were 110,000 new jobs. Then the government said it was 104,000. Incidentally, ADP revised the October figure up to 130,000.

• Stocks Poised to Boom Today
  Eddy Elfenbein, November 30th, 2011 at 8:52 am

  The futures markets currently indicate that stocks will rally big-time today on the news the Fed is teaming up with other central banks to “lower the pricing on the existing temporary liquidity swap arrangements by 50 basis points.” Also, Kourtney Kardashian is expecting again, though the first news piece is probably a lot more important. Skipping all the econo-speak, the idea is that the central banks will provide liquidity to Europe.

  My suspicion, again, is that this isn’t what’s wrong. The problem isn’t a lack of liquidity, though that’s nice to have. The problem is that there’s too much debt and that has to be wound down. That process is going to be long and painful. What the world central banks are doing is almost like pouring high-grade gasoline into a car that doesn’t have any wheels. Now they’re baffled that it doesn’t seem to be doing the trick.

  The immediate market reaction will be that all the “risk assets” will go much higher, and that’s what we’re going to see today. Expect big moves in gold and cyclicals.

  The other news is that China is lowering the reserve requirement for its banks. The mess in Europe has clearly been hurting China. For the third quarter, the Chinese economy plunged all the way down to a growth of, ready for this, 9.1%. Don’t laugh; that’s actually the slowest pace in two years.

  So the People’s Bank of China has said that it’s cutting the reserve ratio for banks their by 0.5%. Check out this chart which shows that Chinese exports to Europe have been “falling off a cliff.”

• Morning News: November 30, 2011
  Eddy Elfenbein, November 30th, 2011 at 5:20 am

  Euro-Area Ministers Agree on Bond Guarantees, Seek Larger IMF Role

  Ratings Firms Misread Signs of Greek Woes

  Company Bond Sales Plunge as Trust in Banks Fades

  ECB’s Noyer: Policy Makers Need To Stabilize European Bond Market

  Danes Look to German Model After Housing Bubble

  Greece’s Piraeus Bank Posts Losses On Higher Provisions

  BOJ’s Nishimura Warns of Risk of Broad Credit Crunch

  A New Shot at Mortgage Relief

  S.&P. Cuts Its Ratings for 15 Banks

  Boeing’s Albaugh Expects Long-Term Benefits From AMR Bankruptcy Filing

  Ranbaxy Without Lipitor May Have to Rely on India Drug Sales

  Facebook May Be Forced to Go Public Amid Market Gloom

  At Diamond Foods, Accounting Weighs on Pringles Deal

  Empire State Building’s Controlling Owner Malkin May Go Public as a REIT

  Samsung Defeats Apple-Sought Ban in Australia

  Paul Kedrosky: Some Upbeat Microsoft News

  James Altucher: 5 Unusual Things I Learned from Isaac Asimov

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• From The Onion’s Stockwatch
  Eddy Elfenbein, November 29th, 2011 at 6:19 pm

  You never know.

  JPMorgan Chase (JPM)

  $34.90 (+$0.72) (+ 2.1%) The financial world was shaken today when CEO Jamie Dimon stated that the Occupy Wall Street movement had significantly eaten into the banking titan’s profits, announced Chase would have to drastically reformulate its business plan, and then paused a beat before saying, just kidding, they made a record $17.4 billion last year.

• My Quick Take on Jefferies
  Eddy Elfenbein, November 29th, 2011 at 12:58 pm

  A number of you have asked my opinion on Jefferies ($JEF). My short answer is that the stock is very undervalued, particularly at $9.50, though it’s still cheap at $11.

  However, even if it’s fully valued (about $15 per share), I don’t think it’s a great stock to own.

• Becton Raises Dividend
  Eddy Elfenbein, November 29th, 2011 at 12:41 pm

  The S&P 500 is back above 1,200 and our Buy List is currently up 0.40% on the day. Reynolds American ($RAI), our boring high-yield stock, just broke $41 which is an all-time high.

  I said in the CWS Market Review from October 14th that I expected to see Becton, Dickinson ($BDX) raise its dividend for the 39th year in a row. I neglected to mention it this last week, but Becton did indeed raise its quarterly dividend from 41 cents to 45 cents per share. Based on the new dividend, the stock now yields 2.5%.

• Some Cautious Signs for Optimism
  Eddy Elfenbein, November 29th, 2011 at 10:55 am

  The economic news continues to be…not horrible. Today we learned that consumer confidence had its biggest jump in more than eight years.

  New homes figures are still terrible, but they increased a tiny bit last month. Here’s an interesting fact I didn’t know: “Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.”

  While initial jobless claims rose last week, that was up from a seven-month low.

  The big news this week will be Friday’s jobs report. The unemployment rate is currently stuck at 9%. The economy has slowly added new jobs but it’s barely kept pace with the natural growth of the population. Wall Street’s forecast for the November jobs report is that the jobless rate will be at 9% and that the economy created 120,000 new jobs. For the last 10 months, the unemployment rate has bounced between 8.83% and 9.18%.

  I’m also looking forward to Thursday’s ISM report. Wall Street expects a reading of 51.5 which isn’t strong but any reading above 50 means that the economy is expanding.

• AMR Files for Bankruptcy
  Eddy Elfenbein, November 29th, 2011 at 10:13 am

  A few years ago, someone had run the numbers and found that the historical profits of the airline industry added up to less than zero. In other words, in aggregate, one person paying another person to be flown on an airplane had been at less than cost.

  The sad fact is that airlines are often terrible investments. Even Warren Buffett lost money on the airlines. He said that if a stockbroker had been at Kitty Hawk, he would have shot the plane down.

  Today we get the news that AMR ($AMR), the parent of American Airlines, has filed for bankruptcy. This is particularly sad for American since it had been the only legacy carrier that hadn’t filed for bankruptcy. In early 2007, the stock had been over $40 per share. Yesterday it closed at $1.62. The airline has lost money for the last three years in a row.

  I’m not sure what it is about airlines that have made them such poor investments. They seem to have endless union trouble. They’re hurt by price wars. They’ve managed to be hurt by both regulation and deregulation.

  A few years ago, Money Magazine celebrated its 30th anniversary by looking at which stocks had been the best performers over the previous 30 years. Interestingly, the #1 stock over the three decades came from the worst-performing industry. The stock was Southwest Airlines ($LUV).

  

• Morning News: November 29, 2011
  Eddy Elfenbein, November 29th, 2011 at 6:08 am

  German Exports Breach EU1 Trillion Sales

  Crisis in Europe Tightens Credit Across the Globe

  Search for Olympus Scam Advisers Highlights Hong Kong Links

  Italy Pays More Than 7% at Bond Auction for Third Time

  China Solar Makers Say U.S. Petition Will Hurt Consumers

  Moody’s Signals Possible Cut for Europe Banks

  Obama Meets Leaders of the European Union

  U.S. Household Debt Falls by 0.6% in Third Quarter

  Facebook Said to Plan IPO at $100 Billion Valuation

  AT&T’s 11th-Hour Plan to Save Its Deal With T-Mobile

  Citigroup Deal With SEC Gets the Rough Legal Treatment It Deserved

  Corzine Pushed Bet on Europe Debt to $11.5 Billion

  New China Life Seeking Up to $2.3 Billion in Initial Offer

  Groupon Is Going Down — Here’s Why

  Roger Nusbaum: It’s Not an Apocalypse, But In Case It Is…

  Jeffrey Carter: Historical Reality Missing In Action

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• Facebook to IPO in the Spring
  Eddy Elfenbein, November 28th, 2011 at 10:47 pm

  The WSJ is reporting that Facebook is now aiming for an initial public offering next spring. Of course, investors have been expecting an IPO for some time but now it finally seems to be coming. The offering could value the company at more than $100 billion.

  The market’s appetite for IPOs is a bit questionable. Groupon ($GRPN) has done poorly and LinkedIn ($LNKD) has fallen off after an initial surge.

  Until now, Facebook’s financial numbers have been shrouded in secrecy. The company now has over 500 shareholders so by April, it would have to file with the SEC if it were public or not. I’m sure that played a role in the timing of the IPO.

  Earlier this year, Facebook got a bunch of money from some investors including Goldman Sachs ($GS). Going by those numbers, the deal valued Facebook at $50 billion.